What happened
Shares of MongoDB (MDB -2.10%) were moving higher Friday after the cloud software stock received a bullish analyst note from Truist. As of 1:43 p.m. ET, the stock was up 5.4%.
So what
Truist analyst Miller Jump initiated coverage on MongoDB Friday morning with a buy rating and a price target of $300, implying an upside of more than 50% from the stock's closing price Thursday. Jump argued that the provider of NoSQL database software is at the crossroads of several converging database markets, and said Wall Street was underestimating its revenue growth potential over the next decade. He also believes the stock will attract a wider investor pool once the company reaches profitability.
Like many software-as-a-service (SaaS) stocks, MongoDB shares have fallen sharply this year as valuations in the sector have compressed due to rising interest rates, fears of a recession, and concerns about a lack of profitability among cloud companies.
MongoDB stock is now down by nearly two-thirds from its late 2021 peak, and the stock plunged following its most recent earnings report as concerns about ongoing losses trumped its strong revenue growth.
Now what
MongoDB has been spending aggressively on sales and marketing to drive adoption of Atlas, its cloud-based database product. In its second quarter, which ended July 31, revenue from Atlas jumped 73% and accounted for 64% of the company's $303.7 million in revenue.
Management remains confident in its long-term growth opportunity, and said in its recent earnings call that even with the macroeconomic headwinds, it has seen no changes in its sales cycle, indicating strong demand for its products.
Though an analyst upgrade isn't going to change the trajectory for the stock, the bull case for MongoDB remains sound despite the shift in investor sentiment.
